Immigration Economics

In an article for National Review Online, editor Rich Lowry recites a popular anti-immigration talking point, claiming that the influx of immigrants into the U.S. hurts "native" workers by depressing wages. While the idea that an increase in the supply of labor will decrease wages is sound economically, this application of the idea by immigration opponents is odd, and fails to account for many other effects of immigration.

The problem with this talking point is that economists widely agree that the continued growth of the American economy (as opposed to the stagnation seen in Europe) is in large part due to population growth driven by immigration. Where European countries are seeing population declines and are suffering from low economic growth, the American economy has fared rather well in comparison.

If the wishes of these immigration opponents were realized and immigration was severely restricted, a number of essential industries (service, construction, etc) would be very hard hit, and the economy as a whole would suffer. As I said above, it is true that increases in labor supply lead to wage decreases. What is being ignored by these anti-immigration pundits is that the short-term wage decrease following population influx is overwhelmed by a number of positive effects.

Such influxes of labor and temporary wage decreases result in more (and more efficient) production, an increase in the standard of living for everyone, and the strengthening of the economy as a whole. Furthermore, as these industries grow, more jobs are produced and wages actually increase again. The long-term effect of this is that more people have jobs, more services and products are available (for less cost) for everyone, and the American economy remains competitive internationally, unlike so many European economies who are suffering.

Since labor behaves economically in the same manner as other resources, the situation can be understood more fully by substituting another resource for labor. Imagine that Mexico had far more candy bars than they could use, and the U.S. didn't have enough candy bars but had a huge number of people who wanted candy bars. It would of course improve everyone's standard of living if the candy bars were able to freely move across the border to meet the demand of the people in the U.S. This would also help the Mexicans since they could trade their candy bars that they didn't need for things that they needed more.

In the same sense, the oversupply of labor in Mexico and the demand for labor in the U.S. could be reconciled by allowing freer movement of job seekers across the border. The result of this would be mutually beneficial -- Americans could make use of needed Mexican manpower, while Mexican workers could work and improve their standard of living, instead of remaining poor and unemployed in Mexico.

This is exactly why so many industries are lobbying against strict immigration controls. Keeping Mexican workers out of the country hurts the U.S. economy just as it hurts un- or under-employed Mexican workers. Restricting movement of people from place to place serves only to create economic inequalities, prevent economic growth, and increase suffering. The influx of immigrants into the U.S. is a natural economic process -- there are more jobs in the U.S. than in Mexico, so people naturally move to resolve this inequality.

The shallow economic observations of Lowry and anti-immigration pundits willfully neglect to recognize the overwhelming benefits of free movement of labor. Exactly why they so quickly cast aside their usual support of laissez-faire markets is anyone's guess, but they seem more than willing to twist the truth to justify their opposition to any non-European immigration. The next time you hear the classic nativist arguments that immigrants are "taking our jobs" or "lowering our wages", feel free to educate them regarding the great economic benefits of immigration.